eLong's (LONG) long road to profitability - notes from the call

Includes: CTRP, LONG
by: Ezra Marbach

eLong (ticker: LONG) reported Q4 2004 earnings tonight. Here are some key points from LONG's conference call and a quick thought:

  • Business travel represents 60-70% of total revenue.
  • Leisure travel represents 30-40% of total revenue.
  • LONG's air ticket business is new and growing rapidly.
  • LONG expects to sell 100,000 air tickets in Q1 2005. It sold 250,000 air
    tickets in all of 2004.
  • 80% of LONG's revenue is generated through its call center - 20% via the Internet.
  • LONG is experiencing greater use of e-tickets and credit cards.
  • LONG added 65,000 customers in Q4.
  • 80% of customers are repeat customers.
  • Beijing and Shanghai generated 35% of LONG revenue in 2004 vs 45% of revenue in 2003.
  • Top 10 Chinese cities generated 50-60% of revenues in 2004 vs 60-70% in 2003.
  • LONG is increasingly adding inventory in smaller cities.

Non-travel revenue:

  • Web site advertising.
  • Non-travel related SMS text messaging.

IAC (ticker: IACI) and LONG:

  • LONG and IACI's Expedia are cross selling each other's services.
  • LONG's English language web site sells Expedia's international inventory.
  • LONG is helping Expedia acquire hotel inventory in China.

Expected new competition:

  • Cendant (ticker: CD) - through a joint venture.
  • American Express (ticker: AXP).
  • Marriott (ticker: MAR).
  • InterContinental Hotels.

Quick thought: The Company admitted on the call that it is focused on growing its operation - not necessarily on achieving profitability. And with IACI owning 52% of LONG's outstanding capital
stock (on a fully diluted basis), and 96% of its total voting power, who could blame them? With Barry Diller at the helm, LONG should have enough cash to support them for years to come, and what sounds like enough IACI patience to go with it. Of course, this doesnt bode well for investors. Unless, as has been suggested, IACI buys the rest of LONG's outstanding stock and integrates it into the IACI empire. Maybe then, investors will have a buyout premium to cheer about.